Jubliee USA's Blog
 

Wednesday, November 16, 2011

The World’s Youngest Nation: South Sudan

By: Samantha Retrosi

Happy Independence Day!

July 9th, 2011 marked South Sudan’s birthday: day one in the existence of the world’s newest nation!  In January 2011, the South took to the polls, in which an overwhelming majority (99%) voted to split from Sudan.  South Sudanese freedom is the final outcome of a 2005 Comprehensive Peace Agreement that put an end to Africa’s lengthiest civil war. Marked by the death of 1.5 million people and the displacement of 4 million more, this date concluded nearly 22 years of conflict.  

"Jubilant citizens raise the flag for an independent and debt-free South Sudan." Photo Credit: Photolure/AP Photo/Pete Muller

South Sudan will start its own history accompanied by an unexpected birthday gift: freedom from the $38 billion debt carried by a formerly unified Sudan.  In the past, other nations such as Bangladesh, Zimbabwe and South Africa have not been so lucky and inherited unjust debts from past regimes.  Starting off debt free is nothing less than momentous for the new nation but this does not come without its own unique difficulties, especially for the new southern state.  The trouble is: how can South Sudan stay debt free?  

South Sudan already struggles with a lack of schools and health services. Human capital levels are extremely low. Only 10 percent of all children who enroll in primary school complete it. Fifty percent of South Sudan’s population lives below the poverty line. The new nation also falls far below the rest of sub-Saharan Africa on the majority of the U.N.’s Millennium Development Goals.  Basic infrastructure is lacking as South Sudan contains only 100 kilometers of paved roads and has no airport that currently meets international aviation standards. Few river channels are navigable, power outages are frequent and access to water and sanitation services is limited.

In order to address the immediate demands of new statehood, South Sudan is struggling to find solutions. Consequently, dependence upon international banks and other Western donors has already become a reality. Economic policy geared toward maintaining good relationships with Western powers from the get-go doesn’t bode particularly well on the autonomy front for South Sudan. Released from debtor status as of late July, the infant state has already accepted new loans from the International Monetary Fund and other international financial institutions (IFI).  The nation seems to be falling back into a cycle of debt that will severely limit its ability to charter an economic and political future unhindered by the manipulation of external creditors. 

History tells us that loans from IFIs create problems within debtor nations due to hindering austerity measures.  Austere IMF budgetary and monetary requirements have prevented poor country governments from spending adequately on short-term financial recovery and long-term development. In fact, a unified Sudan qualified for debt relief under the IMF’s Heavily Indebted Poor Countries Initiative, only to find itself with a decreased capacity to continue investing in social programs. Low-income countries (LICs) have little voice within the institution to hold the Fund accountable, and increasing IMF lending capacity, instead of supplying needed grants, threatens to undermine LICs’ long-term debt sustainability.  Read more by downloading Jubilee’s publication, “Unmasking the IMF.”  In order for South Sudan to stay autonomous and create sustainable solutions the country needs grants, not loans.  The international community should advocate for a debt-free South Sudan to prevent it from becoming yet another poor country stuck in the the cycle of debt that plagues LICs.   

Additionally, if South Sudan were to engage in IFI lending, how do they plan on paying back the loans?  It may seem to IFIs that South Sudan has a powerhouse of revenue from its vast reserves of oil.  Though 98 percent of South Sudan’s revenue capacity is generated by oil, future reliance on this resource would be foolhardy. The new nation must prepare for long-term economic sustainability, and therefore shouldn’t focus exclusively on oil profits as a means to address development imperatives. Oil is a non-renewable resource, the extraction of which often leads to considerable environmental degradation. Furthermore, with considerable volatility in its international price, oil alone cannot be relied upon to build a lasting economy. South Sudan would be wise to pursue a development platform that is rooted in economic diversity rather than a deepening dependency upon one limited commodity. 

Instead of using oil revenue to pay for debt servicing, South Sudan should keep a diverse array of development imperatives in mind and take measures to ensure that any state revenue generated by oil extraction is conducted back into local economic schemes that can stimulate the development of a rich and varied economy. The key here is limiting unfettered access to this resource by external investors, instead favoring internal control and regulation of industry that can ensure South Sudan sees the benefits of its own resource richness.

If the new nation has any chance for long term sustainability, any available revenue should be used to provide the base of a diverse economic infrastructure, ensuring that short-term loans do not suffocate the nation in the long-term. While perhaps somewhat visionary, if the South wants to move in the direction of long-term viability, it would be wise to make use of grants and initiatives that can help the nation pursue clean energy alternatives to the tempting allure of a monoculture created by continued dependency on oil revenues. Funding for this kind of alternative program could be pursued through grant organizations such as Africa Adapt, Alliance for a Green Revolution in Africa, the Global Green Grants Fund, the Small Planet Fund and the Africa Enterprise Challenge Fund. Additionally, the allocation of southern funds should be applied toward community-oriented development within which social spending is the primary focus, rather than pushed to the side as the last priority. The most valuable resource possessed by any nation is its people. While South Sudan certainly faces an array of discouraging limitations, it is also on the precipice of a new horizon with an opportunity to lead by example in a different kind of direction: one where human development takes center stage.

Further Reading:

http://www.imf.org/external/pubs/ft/survey/so/2011/car071811a.htm

http://www.imf.org/external/np/sec/pr/2011/pr11292.htm

http://www.bbc.co.uk/news/world-africa-14069082

http://www.sudantribune.com/South-Sudan-launches-private,38131

http://www.jubileedebtcampaign.org.uk/South3720Sudan3720starts3720life3720debt3720free+7163.twl

http://www.gurtong.net/ECM/Editorial/tabid/124/ctl/ArticleView/mid/519/articleId/5484/EU-Toughens-Funding-Measures-On-South-Sudan.aspx


Thursday, July 7, 2011

End Tax Haven Secrecy

By Stephanie Cook

Tax injustice has become a serious international issue that requires serious action and attention.  Jubilee USA is extending its focus from debt relief to solving the root causes of unsustainable debt.  Photo Credit: Stephanie Cook This new wave in the Jubilee USA movement involves an active focus on Tax Justice and the damaging effects that unfair tax practices by multinational corporations have on the world’s poorest countries. 

Large multinational corporations commit tax injustice when they store taxable funds in geographic
areas with low to no taxation. 
These areas are called tax havens. Multinational corporations make use of these little treasure islands because it allows them to keep large amounts of profit, yet in doing so they rob the countries in which they operate of much needed tax revenues.   

Taxation is vital in both low-income and high-income countries as it enables governments to provide basic infrastructure and services such as healthcare and education, which not only improve quality of life but also promote economic stability.  It is estimated that the annual loss of taxable revenue caused by corporations using tax havens is $250 billion (Tax Justice Network, 2005).  This figure is shocking when considering:

  • It would cost $10 billion per year to achieve universal primary education.
  • It would cost approximately $3.6 billion per year to provide anti-retroviral medication to the population of sub-Sahara Africa suffering from HIV/AIDs.
  • It would cost an estimated $6 billion per year to battle malaria in African nations.
Not only does loss of internal revenue affect the ability of governments to advance the general living and social conditions of their citizens, it forces them to become more and more dependent on foreign funding. It is estimated that for every $10 a country receives in developmental aid, $15 exits the country as a result of tax dodging. The collection of the dues owed by large multinational corporations to low-income countries would result in less borrowing from international loan sources and less reliance on foreign aid. 

While tax injustice prevails, so will the cycle of poverty. Jubilee USA Network advocates for a more transparent international finance and taxation system in an effort to ensure that low-income countries receive what is rightfully theirs. 

Jubilee USA along with many other organizations is a strong advocate of this cause. Read more about this issue from Jubilee here.  Check out the videos posted by our friends at Christian Aid to get their perspective on the issue:

 

Wednesday, May 4, 2011

Stop Commodity Speculation and Help Hunger

By Kimberly Bien

In recent years, the media has focused on global food riots that have resulted from increasing food prices. For example, rioting over high food costs in Algeria earlier in 2011 can be seen here.  The rising violence of the food riots in Algeria and Tunisia demonstrate how quickly both individual’s lives and how society operates when people are unable to feed themselves.  The global food crisis has forced the poorest people in the world to give up important social expenditures, like health and education, to be able to buy basic commodities like corn and sugar, and face the real risk of hunger and malnutrition. In fact, from June 2010 to January 2011 corn and sugar prices had increased an astounding 73%

The Stop Tax-Breaks for Oil Profiteering and Commodity Speculation Act (STOP Commodity Speculation Act) would close a loophole that gives financial speculators tax incentives to gamble on the commodity market, which has been linked to the rising food prices.  Senator Wyden’s (D-OR) legislation, and would likely bring an end to uncontrollable rising commodity prices, allowing the poorest to buy basic commodities and social investments.

Currently, commodity producers (farmers, granaries, etc.) are paying general income taxes of 35% on income made on these markets, while hedge funds and other financial institutions pay a much smaller portion of their long-term and short-term profits (23%). The lower taxes for hedge funds encourage financial institutions to gamble and speculate in the commodity futures market.  Compared to other markets, like stock, it has lower margins  and low brokerage rates. Therefore, large investors take advantage of this market and indirectly raise commodity (largely corn, wheat, and edible oil) prices through speculation, which restricts the world’s poorest ability to purchase food to feed their hungry families.

It is crucial to support the STOP Commodity Speculation Act to remove tax-break incentives from big financial speculators in order to bring stability to the world commodities market.  In this way, we can assist poor citizens in meeting the basic nutritional needs of themselves and their families.

Additional Sources

See Dave Kane’s (Associate for Latin America and Economic Justice, Maryknoll Office for Global Concerns) blog “Stop Gambling on Hunger” to learn more about the damaging effects of speculation on commodity futures market.

Take a look at the video above to get a brief background on the negative impact of financial futures speculation on the world economy’s different markets.

Works Cited

“Food Riots 2011,” http://theeconomiccollapseblog.com/archives/food-riots-2011

World Bank statistic from Reader’s Digest, “5 Things that will be more expensive in 2011” http://www.rd.com/money/5-things-that-will-be-more-expensive-in-2011/

“When you buy a futures, you don't have to pay the entire amount,


Wednesday, April 20, 2011

15 Years Later: The Jubilee Movement

By Mac Krzyzewski 

In his most recent  “Poverty Matters” blog post for The Guardian, Jonathan Glennie writes about the “extraordinary successes” of the Jubilee Movement since its creation in 1996. The movement’s popularity stems from successful protests in the late 1990’s, including one in Cologne, Germany where a 24 million signature petition was handed to the G8. 

“There are many reasons why the Jubilee movement is so special for so many of us. First, it worked. For many years the economists of the World Bank and the British treasury had told us that debt simply could not be cancelled. It was a moral hazard. There were rules. But they hadn't reckoned on the moral power of the human chain around the Birmingham G8 in 1998, chanting for debt cancellation – famously audible to the negotiators in their conference rooms. When debt cancellation finally became a reality for some countries, it led to increased spending on health and education, saving and improving millions of lives.”

He also notes that beyond the economic successes of the Jubilee movement, there have been political and social gains. Debt relief and cancellation, coupled with changes to loaning practices, have allowed developing countries to regain some autonomy from donors. Additionally, the Jubilee movement showed governments that the Western public could understand a seemingly complex financial issue like debt relief. 

Our work is not over though, 

“There is still a lot more to do, which is why the UK's Jubilee Debt Campaign is still campaigning, along with the Jubilee USA Network a


Tuesday, March 15, 2011

Jubilee Deputy Director Speaks Amongst Anti-Poverty Leaders


110311_lader_panel                   Panelists: Arthur Keys, Katherine Marshall, Rev. Linda Lader (moderator),                    Melinda St. Louis, David Beckman. 

Last Wednesday, our deputy director, Melinda St. Louis, was invited by YaleDivinity School to discuss poverty reduction as part of the school's 40-day "Mobilizing Faith, Fighting Poverty" initiative. She served on a panel with Arthur Keys, President and CEO of International Relief and Development, Katherine Marshall, Executive Director of the World Faiths Development Dialogue of Georgetown University, and David Beckmann, President of Bread for the World. Senator Chris Coons of Delaware, a Yale Alumnus, gave the keynote address.

"Melinda St. Louis, deputy director of Jubilee USA, which rallies people of faith to advocate debt relief of poor countries, shared details of a petition now circulating that calls on President Obama and the U.S. government to "lead global efforts to transform the global economy, recognizing our responsibility as our sisters' and brothers' keepers." The "1,000 Faith Leaders Initiative" hopes to secure the signatures of 1,000 religious leaders by June. The petition says we must "repair the historical injustices that impoverish the poorest and enrich


Tuesday, March 8, 2011

International Women’s Day - A Chance for Jubilee Justice

By Julia Dowling

International Women’s day always makes me feel torn.  On one hand, one day set aside for global recognition of the contributions made by and challenges facing  women and girls has never seemed so critical.  There seems to Unicef be a war on women everywhere: sexual health services are being cut in the United States while the war in the Democratic Republic of Congo rages on, where 15,000 women were raped just last year.  But on the other hand, I often think “shouldn’t every day be international women’s day?” 

Goal three of the Millennium Development Goals (MDGs) aims to do just this – make every day a day for women by eliminating gender disparity and empowering women.  The goal is to “eliminate the gender disparity in primary and secondary education preferably by 2005, and to all levels of education no later than 2015.”  The United Nations highlights education as the key to empowerment for girls and women, both in a traditional sense of schooling but also through wider educational efforts to inform men and boys of gender issues and increase gender sensitivity.

How is this relevant to Jubilee’s work though?  Well, debt cancellation plays a critical role in helping to achieve Millennium Development Goal #3 through dramatically increasing access to basic education.  Before the debt cancellation arrangements of 1999 and 2005, many poor countries were forced to charge school fees for primary education by the International Financial Institutions.  When push came to shove and poor families could afford to send just some of their children to school, the boys were often selected over the girls to attend primary school.  Thanks to such school fees, a whole generation of young and promising girls lost their chance to attend school because the education of their male counterparts was deemed more valuable. 

Even after these deplorable conditions were lifted thanks to global outcry, impoverished governments had little extra revenue to spend on education after paying huge sums of debt service to international creditors.  Debt cancellation meant that school fees were removed and resources once used to pay debts were freed up to be used toward the health and education sectors. 

In Tanzania, children attending school increased by 50%.  The country was able to build nearly 2,500 more schools and hire 28,000 more teachers.  Children passing primary school increased from under 20% to over 40% within four years after the country received debt cancellation. 

MDG-3 Just as debt cancellation isn’t Jubilee’s only concern, MDG #3 won’t be achieved simply by increasing women and girl’s presence in the classroom.  Broader economic justice reforms are necessary if we want to truly change the structures that cause gender disparity and sexism.  This means changing the international financial system to include the most vulnerable people, especially women from the Global South.  On all levels, we need to confront the biases that hold women back from receiving the health, education, and employment opportunities they deserve. 

This year’s annual Ecumenical Advocacy Days conference focuses on Women and


Thursday, March 3, 2011

Tax Evasion: How the Poor Pay for the Powerful

Blog 

Ghanian Shop Owner Marta Luttgrodt pays more actual income tax for selling SAB Miller beer than the entire multinational corporation     

By Raina Davis and Katherine Philipson 

In his State of the Union Address last month, President Obama expressed concerns about the effects of tax evasion on American small businesses. He stated, "Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change." 

Around the world, corporate tax evasion unfairly shifts the burden of taxation onto small businesses and individuals, and limits governments’ revenue to spend on necessities and development. In the United States, two-thirds of American corporations paid no income tax at all between 1998 and 2005. 

Recently, the U.S. House of Representatives approved $61 billion in budget cuts - including federal funding for family planning and teen pregnancy prevention, Pell Grants for lower-income college students, and food aid for poor pregnant women and women with children. Alternatives to cutting huge amounts from social programs that help America’s most vulnerable, however, exist: trimming the massive military budget ( worth 909.4 billion in FY 2011), reversing President Obama’s extension of Bush-era tax cuts for the wealthiest and lowering of the estate tax (worth $900 billion), and closing U.S. corporate tax loopholes (worth $37-60 billion) all would save the government hundreds of billions.  

Activists in the United States and the UK are starting to wake up to the fundamental principle of tax justice. As harmful as tax evasion is to developed nations, corporate tax evasion may be even more burdensome in low-income countries where individuals and small businesses have less capacity to pay the taxes imposed to fund a country’s budget. 

Governments of developed nations receive on average about a quarter of their GDP from personal income tax. Low-income countries tend to rely more heavily on indirect taxes, such as VAT (value added tax). These regressive taxes end up especially hurting poorer people because they represent a greater proportion of their annual income. Greater revenue from corporate income tax would free governments to spend money on providing basic necessities to their people and lessen dependence on international aid. In 2009, half of Ghana's government revenue came from taxes; 8% from personal income tax, 17% from VAT, and only 7% from corporate income tax. Christian Aid estimates that developing countries collectively lose US$160 billion collectively in tax revenues as a result of international tax evasion, more than all official development assistance combined.

How does all this evasion work? The most common two methods are transfer pricing and transfer mispricing. Transfer pricing, which is legal, occurs when a multinational corporation sets up subsidiary companies in countries that have very low tax rates, called tax havens. These subsidiary companies charge fees for intangible services such as brand use, procurement, insurance, management, and trademarks. The overhead costs of such a subsidiary are minimal and the profit, which comes directly out of the annual income of the parent company, is subject only to the tax rates of the tax haven. Transfer mispricing, which is illegal, occurs when subsidiaries of a parent company sell goods to each other at artificially inflated or deflated prices. Again, parent companies can manipulate the location of their profits in order to minimize taxes. 

This type of large-scale tax evasion is only possible if a company already has access to substantial funds. Small businesses cannot afford to front their entire inventory before actual sales, nor set up dependents in other countries. As a result, many small, local businesses throughout the world are paying heavier taxes than their large-scale competitors. For example, one woman selling beer outside SABMiller’s brewery in Ghana paid more actual local income tax last year than the entire multi-million dollar brewery.  

Local investors also lose as they only profit from subsidiary they are directly linked to. A significant proportion of the Accra Brewery in Ghana is owned by locals. Between 2007 and 2010,  the Brewery received 63.3 million pounds from sales in Ghana, yet the company reported a pre-tax loss of 3.07 million pounds. SABMiller worldwide, which owns the Accra Brewery, profited substantially each year. 

ActionAid recommends a number of policies to close international tax loops: country-by country financial reporting, better international tax information exchange, stronger taxation rights for developing countries, investment in tax authorities, and global political cooperation. 

Enabling governments around the world to retain their rightful portion of profits earned within their borders will build up their ability to provide basic services and invest in development. This in turn will help avoid the need to take out new sovereign loans and the dangers of unsustainable debt. For this reason, Jubilee USA is joining with the Tax Justice Network in an attempt



Upcoming Events:

Wednesday, February 8, 2012
4:00 pm Confirmation
6:00 pm "Pause & Praise"
7:00 pm Adult Choir
Friday, February 10, 2012
8:00 am T.O.P.S.
Saturday, February 11, 2012
8:00 am Lutheran Men in Mission
Sunday, February 12, 2012
Fundraiser between services for Syl's prison ministry
Prison Ministry Sunday
8:00 am Worship
9:15 am Sunday School
10:30 am Worship
10:30 am Worship

Lectionary Texts:

February 6, 2012:
First Reading: 2 Kings 4:8-17, 32-37
Psalm: Psalm 102:12-28
Second Reading: Acts 14:1-7
February 12, 2012 Sixth Sunday after the Epiphany:
First Reading: 2 Kings 5:1-14
Psalm: Psalm 30
Second Reading: 1 Corinthians 9:24-27
Gospel Reading: Mark 1:40-45

RCL (C) 1992 The Consultation on Common Texts used by permission


Our Redeemer Lutheran Church on Facebook


Follow us on twitter

twitter